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Progress in Rail Reform Inquiry Report Progress in Rail Reform Inquiry Report Report No. 6 5 August 1999 Commonwealth of Australia 1999 ISBN 0 646 33597 9 This work is subject to copyright. Apart from any use as permitted under the Copyright Act 1968, the work may be reproduced in whole or in part for study or training purposes, subject to the inclusion of an acknowledgment of the source. Reproduction for commercial use or sale requires prior written permission from AusInfo. Requests and inquiries concerning reproduction and rights should be addressed to the Manager, Legislative Services, AusInfo, GPO Box 1920, Canberra, ACT, 2601. Publications Inquiries: Media and Publications Productivity Commission Locked Bag 2 Collins Street East Melbourne VIC 8003 Tel: (03) 9653 2244 Fax: (03) 9653 2303 Email: [email protected] General Inquiries: Tel: (03) 9653 2100 or (02) 6240 3200 An appropriate citation for this paper is: Productivity Commission 1999, Progress in Rail Reform, Inquiry report no. 6, AusInfo, Canberra. The Productivity Commission The Productivity Commission, an independent Commonwealth agency, is the Government’s principal review and advisory body on microeconomic policy and regulation. It conducts public inquiries and research into a broad range of economic and social issues affecting the welfare of Australians. The Commission’s independence is underpinned by an Act of Parliament. Its processes and outputs are open to public scrutiny and are driven by concern for the wellbeing of the community as a whole. Information on the Productivity Commission, its publications and its current work program can be found on the World Wide Web at www.pc.gov.au or by contacting Media and Publications on (03) 9653 2244. Contents Abbreviations IX Glossary XIII Terms of reference XVIII Overview XIX Recommendations XXXIX 1 Introduction 1 1.1 This inquiry 2 1.2 Other inquiries and reports 3 1.3 This report 4 2 Railways in Australia 7 2.1 Rail transport in Australia 8 2.2 Railway characteristics 24 3 Rail reform in Australia 35 3.1 The 1991 inquiry 36 3.2 Factors driving reform in the 1990s 39 3.3 Reform initiatives 41 3.4 Problems identified in 1999 51 4 Performance of rail 59 4.1 The Commission’s approach 59 4.2 Productivity performance since 1990 67 4.3 Stakeholder outcomes since 1990 74 4.4 Summary of performance 91 CONTENTS V 5 The Commission's approach 93 5.1 Objectives of reform 93 5.2 Areas of potential reform 95 5.3 Railway networks 95 5.4 Subsequent chapters 96 6 Structural reform 99 6.1 Structure of rail authorities 100 6.2 Why consider structural separation? 102 6.3 The costs of structural separation 107 6.4 Which structures are appropriate? 108 6.5 Conclusion 124 7 Public and private participation 125 7.1 Objectives and the role of government 125 7.2 Public/private sector models 126 7.3 Taxation issues 151 8 Access to rail infrastructure services 155 8.1 Australian access regimes 156 8.2 Regulating access in rail markets 161 8.3 Costs of access 173 8.4 Pricing and allocating train schedules 176 8.5 Costing methodology 186 8.6 Complexity of operating on the interstate network 189 9 Safety regulation and operating procedures and standards 193 9.1 Safety regulation 196 9.2 Operating procedures and standards 211 9.3 Codes of practice 215 9.4 Advancing regulatory reform 220 10 Competitive neutrality 227 10.1 Competitive neutrality between rail operators 227 10.2 Competitive neutrality across rail and road transport 231 10.3 Planning and investment in land transport 251 VI CONTENTS 11 Social dimensions 261 11.1 Government payments to railways 262 11.2 Subsidising railways 264 11.3 Improving the provision of non-commercial rail services 272 11.4 Employment 278 12 The way ahead 289 12.1 The case for continued reform 289 12.2 Priorities for reform 290 12.3 Implementation strategy 293 12.4 The impact of reforms 298 A Conduct of the inquiry B Rail network maps C History of railways in Australia D Reform initiatives E International railways F Australian access regimes G Safety regulation and operating procedures and standards H The network manager and investment in the interstate track I The purchaser-provider framework J The railway workforce References CONTENTS VII VIII CONTENTS Abbreviations Abbreviations ABS Australian Bureau of Statistics ACCC Australian Competition and Consumer Commission ACT Australian Capital Territory AFFA Department of Agriculture, Fisheries and Forestry AN Australian National ANZSIC Australian and New Zealand Standard Industrial Classification ARA Australasian Railway Association ARSAA Australian Rail Safety Accreditation Authorities ARTC Australian Rail Track Corporation ASR Australia Southern Railroad ASU Australian Services Union ATAC Australian Transport Advisory Council ATC Australian Transport Council ATN Australian Transport Network AURDR Australian Urban and Regional Development Review AUSTRAC Austrac Group and Capricorn Capital AWB Australian Wheat Board BFA Bicycle Federation of Australia BIE Bureau of Industry Economics BNSF Burlington Northern and Sante Fe Railway Company BOO Build-Own-Operate BOOT Build-Own-Operate-Transfer BR British Rail BTCE Bureau of Transport and Communications Economics BTE Bureau of Transport Economics BTO Build-Transfer-Operate BV Banverket CASA Civil Aviation Safety Authority Australia CIPR Competitive Imputation Pricing Rule ABBREVIATIONS IX CN Canadian National COAG Council of Australian Governments CP Canadian Pacific CPA Competition Principles Agreement CPI Consumer Price Index CR Consolidated Rail Corporation CRS Constant Returns to Scale CSO Community Service Obligation CSX CSX Transportation CTC Competitive Tendering and Contracting DBAG Deutsche Bahn Aktiengensellschaft DEA Data Envelopment Analysis DORC Depreciated Optimised Replacement Cost DTRS Department of Transport and Regional Services EBA Enterprise Bargaining Agreement EBIT Earnings Before Interest and Tax EBR Emu Bay Railway EC European Commission ECMT European Conference of Ministers of Transport EWS English Welsh Scottish Railways FA Ferrocarriles Argentinos GNRS Great Northern Rail Services GSR Great Southern Railway GST Goods and Services Tax GTW Grand Trunk Western Inc HORSCCTMR House of Representatives Standing Committee on Communications, Transport and Microeconomic Reform IC Industry Commission ICR Illinois Central Railroad Company IGA Intergovernmental Agreement IPART Independent Pricing and Regulatory Tribunal of NSW IRG Industry Reference Group JNR Japanese National Railways KCS Kansas City Southern Railway Company LAP Labour Adjustment Package NCC National Competition Council NCP National Competition Policy NEC National Electricity Code X ABBREVIATIONS NECA National Electricity Code Administrator NEM National Electricity Market NEMMCO National Electricity Market Management Company NOHSC National Occupational Health and Safety Commission NRC National Rail Corporation NRR Northern Rivers Railroad NRTC National Road Transport Commission NS Nederlandse Spoorwegen NSC Norfolk Southern Corporation NSW New South Wales NSWLGSA Local Government and Shires Associations of NSW NSWTSB New South Wales Transport Safety Bureau NT Northern Territory ntkm net tonne-kilometre NTPT National Transport Planning Taskforce NZRC New Zealand Rail Corporation NZRL New Zealand Rail Limited OECD Organisation for Economic Cooperation and Development ORG Office of the Regulator General (Victoria) ORR Office of Regulation Review Patrick Patrick The Australian Stevedore PC Productivity Commission pkm passenger-kilometre PTB Passenger Transport Board PTC Public Transport Corporation QCA Queensland Competition Authority QMC Queensland Mining Council QR Queensland Rail RAC Rail Access Corporation RIS Regulatory Impact Statement ROA Return On Assets ROE Return On Equity ROSCOs Rollingstock Companies RSCA Rail Safety Committee of Australia RTBU Rail Tram and Bus Union SA South Australia SALGA South Australian Local Government Association SARCC South African Rail Commuter Corporation ABBREVIATIONS XI SCNPMGTE Steering Committee on National Performance Monitoring of Government Trading Enterprises SCOT Standing Committee on Transport SCT Specialized Container Transport SJ Statens Jarnvagar SOO Soo Line Railroad Company SRA State Rail Authority of New South Wales STA State Transport Authority (South Australia) TFP Total Factor Productivity TPA Trade Practices Act 1974 (Cwlth) TOCs Train Operating Companies UIC International Union of Railways UP Union Pacific US United States VicTrack Victorian Rail Track Access Corporation VLF V/Line Freight VLP V/Line Passenger VRS Variable Returns to Scale WA Western Australian WCR West Coast Railways XII ABBREVIATIONS Glossary Above track Train operations for freight and passengers using operations rollingstock. Access charge A fee paid by an operator of transport services for the use of infrastructure. Access regime Procedures to govern access to rail track. Includes setting an access pricing policy, criteria for permitting access, and operating conditions. Average length of Net tonne-kilometre divided by net tonne carried. This is a haul measure of the average distance that freight is carried. Average load per Net tonne carried divided by the number of locomotives. locomotive This is a measure of the average load hauled by a locomotive. Below track Physically fixed infrastructure such as track, sleepers, infrastructure signals, terminals and yards. Bulk freight Comprises commodities such as coal, iron ore, other minerals and grain. Catenary system Overhead power cables for electric trains. Competition for the Competition between
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